DWS: The likelihood of the Federal Reserve raising interest rates remains very low at present
DWS Chief U.S. Economist Christian Scherrmann stated that the Federal Reserve will keep interest rates unchanged at the January meeting, and inflation data is expected to provide support in the future. Despite political uncertainties that may drive up prices, central bank governors are waiting for further political signals to adjust monetary policy. DWS believes that the likelihood of interest rate hikes remains low at present, while there is still room for future rate cuts
According to the Zhitong Finance APP, DWS Chief U.S. Economist Christian Scherrmann stated that the Federal Reserve is expected to maintain interest rates at the January Federal Open Market Committee (FOMC) meeting. Federal Reserve Chairman Jerome Powell described some minor changes in the news statement during the press conference, such as the removal of the phrase "further advance in disinflation," as a cleanup rather than a signal.
Central bank governors seem to be buying time. DWS pointed out that it had anticipated that the last mile of disinflation would take time, and the latest data on inflation and the labor market supports a more gradual easing pace. Political uncertainties surrounding issues such as tariffs, spending, and immigration could potentially drive up prices, making a more cautious and data-dependent approach reasonable. Central bank governors are currently waiting for further political guidance to adjust monetary policy, which in turn limits forward guidance.
Looking ahead, Christian Scherrmann expects inflation data to provide support, at least in the first quarter. This leaves room for rate cuts in March or even June, but the current risks are certainly leaning towards reducing easing rather than increasing it. However, the Federal Reserve itself seems to be able to respond easily, as it has already cut rates by 100 basis points. Nevertheless, DWS believes that the likelihood of rate hikes at this time remains low